Week­end Hard land­ing for for­mer KQ inance boss

Fi­nance di­rec­tor of 8 years Alex Mbugua inds him­self in the cold de­spite court or­der

Business Daily (Kenya) - - FRONT PAGE - Mugambi Mutegi pmutegi@ke.na­tion­media.com

When for­mer Kenya Air­ways fi­nance di­rec­tor Alex Wainaina Mbugua drove his sil­ver Prado into the air­line’s Em­bakasi head­quar­ters at 8:30am last Wed­nes­day, he cer­tainly knew he was as un­wel­come as a pri­est is in a raunchy night­club.

If the 53-year-old tee­to­taler had any doubts of this, the air­line’s se­cu­rity guards wasted no time ap­prais­ing him; he was blocked from ac­cess­ing his of­fice as or­dered by the court the pre­vi­ous day.

In­stead of keys to his of­fice, from which he was in sim­i­lar dra­matic fash­ion ejected on Jan­uary 19, 2016, Mbugua was handed a let­ter bear­ing in­struc­tions that he im­me­di­ately pro­ceed on leave for 21 days.

Mr Mbugua was draw­ing his un­flap­pable con­fi­dence from a rul­ing by Em­ploy­ment and Labour Re­la­tions Judge Mon­ica Mbaru who, after court pro­ceed­ings span­ning 20 months, con­cluded that KQ un­law­fully sacked its fi­nance di­rec­tor of eight years.

The judge or­dered the na­tional car­rier to ei­ther re­in­state him im­me­di­ately, and pay him his back­dated dues in 30 days, or wire the equiv­a­lent of 48 months ba­sic pay to his bank ac­count.

The first op­tion would cost the broke air­line about Sh66 mil­lion, based on Mr Mbugua’s gross monthly salary of Sh3 mil­lion. The al­ter­na­tive racks up to a whop­ping bill of Sh144 mil­lion.

“I was taken aback by the move to send me on leave. I was told that the CEO, who was to re­ceive me ac­cord­ing to the court or­der, was not in the coun­try. The per­son hold­ing brief for him was also said to be unavail­able,” said Mr Mbugua.

“I was ba­si­cally told to go on leave as the air­line re­views the judg­ment and their next course of ac­tion. My un­der­stand­ing is that this (forced leave) di­rec­tive is con­trary to the court’s orders. How­ever, my lawyers are re­view­ing it.”

In sack­ing Mr Mbugua, KQ ac­cused him of in­ten­tion­ally skipping an ur­gent per­for­mance re­view meet­ing, which was seen as in­sub­or­di­na­tion.

The air­line also claimed he was an un­der­per­former, an ac­cu­sa­tion Mr Mbugua’s lawyers pushed back on in court, ar­gu­ing that he had re­ceived sev­eral ac­co­lades for his job.

Mr Mbugua’s sharp crit­ics in the pub­lic sphere, some of whom in­ter­act with this writer on his so­cial me­dia pages, hold a sim­i­lar no- love-lost view as KQ; he is one of man­agers re­spon­si­ble for plung­ing the air­line into a fi­nan­cial rut.

Many of those who ac­cuse him of mis­car­riage of duty will ordinarily and quickly point out two things – the aborted Project Mawingu and the costly fuel hedg­ing pro­gramme.

Project Mawingu, the am­bi­tious ex­pan­sion­ary plan was sup­posed to grow KQ’S des­ti­na­tions from the then 57 in 2011 to 115 in a decade. This was to be sup­ported by a beef­ing up of its fleet from 34 to 119.

Mr Mbugua, who joined KQ in July 2008, chaired the strate­gic plan­ning com­mit­tee that de­vel­oped the project, and presided over the cap­i­tal rais­ing for the plan which needed a whop­ping $3.65 bil­lion in the first five years.

The debt-fi­nanced fleet mod­erni­sa­tion sad­dled the air­line with huge and ex­pen­sive li­a­bil­i­ties, mostly from com­mer­cial banks.

Project Mawingu spec­tac­u­larly im­ploded, leav­ing the air­line with ex­cess ca­pac­ity and auto-re­gen­er­at­ing ex­cuses from the man­agers who worked on the project, many of whom have since ex­ited.

Huge fuel hedg­ing and forex losses, a run­away wage bill, ter­ror­ism at­tacks and in­creased com­pe­ti­tion from other car­ri­ers are all said to have col­luded to swat the project off course.

Ex­pect­edly, Mr Mbugua, who says he has re­cently reded­i­cated his life to God, has his own set of ex­pla­na­tions.

“When I joined KQ, 13 air­craft pur­chase orders had been made. Nine were firm and four op­tional. Sur­pris­ingly, we did not have a net­work plan for the in­bound air­craft. I was tasked with help­ing de­velop one,” he told Busi­ness Dailh Thurs­day.

“Now, the plan was not bad. How­ever, the com­mer­cial team failed us be­cause they were un­able to find pas­sen­gers for the planes. Oc­cur­rences like Ebola in West Africa af­fected ev­ery­body so that should not be used as an ex­cuse.”

An­other in­dict­ment that Mr Mbugua just can­not seem to shake off, but not for want of try­ing, is the im­pact that fuel hedg­ing had on KQ’S fi­nances. Sev­eral times a year, he would get on a podium and ex­plain why it was pru­dent for the air­line to con­tinue us­ing this con­trac­tual tool to pro­tect it­self from the price volatil­ity of fuel price, KQ’S sin­gle largest ex­pense.

KQ re­ported a Sh26.2 bil­lion net loss for the year ended March 2016 (three months after Mr Mbugua’s exit) com­pared to Sh25.7 bil­lion after-tax loss it posted the pre­vi­ous year.

This record-break­ing cor­po­rate Kenya loss was mainly the re­sult of a Sh5.1 bil­lion loss KQ booked from fuel hedg­ing. Soon there­after, for­mer chief ex­ec­u­tive Mbuvi Ngunze said: “My po­si­tion is that we have put on hold new hedg­ing con­tracts.”

De­spite be­ing KQ’S chief fi­nance ad­vi­sor through tu­mul­tuous fuel hedg­ing pe­ri­ods, Mr Mbugua main­tains that it was the right de­ci­sion for the air­line.

“Hedg­ing is a risk man­age­ment tool that all re­spon­si­ble air­lines make use of,” the avid golfer ex­plained. “When we made losses, big air­lines like KLM and Air France suf­fered too. I still be­lieve hedg­ing was the safer al­ter­na­tive.”

The son of Rev­erend Judy Mbugua of Ladies Home Care Fel­low­ship holds two Masters of Busi­ness Ad­min­is­tra­tion (MBA) de­grees.

One of them is on in­ter­na­tional fi­nance from Wits Busi­ness School in South Africa ac­quired in 2001 and an­other on gen­eral fi­nance from New York Univer­sity four years ago.

Prior to join­ing KQ in July 2008, he was CFO at Jo­han­nes­burg-based Africa Open Pit Mines An­glogold Ashanti, a global gold pro­ducer op­er­at­ing in 11 coun­tries and listed on five bourses, in­clud­ing the New York Stock Ex­change.

But what does the fa­ther of four re­ally want from the ail­ing na­tional car­rier? His job back? The hefty pay off ?

“This mat­ter has been ex­tremely strain­ing on my fam­ily, my be­ing and on my fi­nances. I do not want a long drawn bat­tle with KQ in court. I sim­ply want clo­sure one way or an­other,” he told said.

“This mat­ter has been ex­tremely strain­ing on my fam­ily, my be­ing and on my fi­nances.

--FILE

TUR­BU­LENT TIMES For­mer Kenya Air­ways inance di­rec­tor Alex Wainaina Mbugua.

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